No, not "that" F-Word.
💰FEES.
📈 Investment fees.
🤓 Advice fees.
👩💼 Administration fees.
📊 Management fees.
What are they? Why do they exist? What do you need to know about them?
Whether you are investing with a bank, an advisor or Do-it-yourself —You pay fees.
In this industry, we lack a certain amount of transparency regarding fees, and I'm here to explain some of them.
1️⃣ Management Expense Ratio (MER): EVERYONE pays this. Accountants, traders, analysts, janitors. The MER covers these operations and transaction costs of operating the fund.
🏦"The rep at the bank says I don't pay any fees." (YES, YOU DO)
The compensation embedded in the MER for recommending the fund to consumers is often not appropriately disclosed. Fund companies will still charge higher MERs by creating structured products even when compensation is separated.
You can ask your advisor or bank representative to offer lower-cost options. And be sure to ask them, "HOW DO YOU GET PAID?"
2️⃣ Advice & Service Fees: When compensation is stripped from the MER, the advisor will be paid by charging this fee.
The advisor should ensure that your service requests are met in a timely manner and that you are invested appropriately according to your risk capacity and risk tolerance.
Others will offer financial advice that goes beyond investing, like, succession planning, risk management, tax planning, buying a home, and other areas of financial advice.
Be sure to ask what value are you getting for their fee?
3️⃣ Administration fees: If you're invested through an employer-sponsored savings program, you can usually find this fee in your statement. This fee only covers the costs of managing your investments.
4️⃣ Investment Management fees: Some practitioners in financial services handle individual securities to build custom portfolios for their clients. This fee usually only covers the portfolio.
Having to pay fees is an excellent way to know how much you are paying for advice and if the value of what you are getting in return is worth the price. I encourage everyone to have this conversation with their advisor.
Having a separate fee for non-registered accounts and business accounts also allows for some tax deductions on income produced by those accounts. 🧔🏼
Reach out if you have questions!
